How to Create a Custom Savings Plan

Being money savvy may not be considered “cool,” but it will help you build up savings to (hopefully) retire on a beach one day. We spoke to Silvi, KOHO’s in-house financial coach, about how to create a custom savings plan that you can actually stick to.

As KOHO’s financial coach, Silvi helps Canadians get access to unbiased financial advice. She creates custom plans for KOHO users to tackle their debt or build a budget.

KOHO is a Fintech company that provides Canadians with an alternative to traditional banking. KOHO offers a no-fee everyday spending account, with an awesome app that makes it easy to manage your money. You can create automated savings goals to save up for big expenses and vacations alike. Unlike typical debit cards, you earn 0.5% cash back on every purchase. Learn more about KOHO here.

As a financial coach, I get a lot of questions about how I optimize and organize my finances. I’ve been through periods of high, low, stable and fluctuating income, yet the tricks have always remained the same.

For me, the key is automating my savings. This way, I can create a barrier between what’s spendable today and what isn’t. In other words, it eliminates having to choose between taking a last-minute trip to Mexico versus saving a little extra for retirement in 30 years. With automated savings, I can do both!

In this article, I’ll lead you through the process I personally use to save for my long term and short term financial goals. Believe me, it’s an amazing way to achieve your savings goals and tackle your debt quickly.

Creating A Custom Savings (or Debt Pay Down) Plan

Step 1: Determine your priorities or financial goals

Are you hoping to slay your debt load ASAP? Buy a condo? Start your own business? Start building a nest-egg? How much money will this take and when will you need it?

Having goals can help shape your financial plan and give you the motivation to make it happen!

Tip: if you have any debt that has a rate of over 4-5% (credit card, student loan, other non-mortgage debt), you should focus on paying it down before saving or investing.

Step 2: Do a check-up of where your money is going

In the world of Uber and Amazon, it’s easy to lose track of our spending. So, an important step to improving your money management skills is to look under-the-hood of your current spending. There’s no need to judge yourself, think of this as an opportunity to make some positive changes.

Grab an excel spreadsheet or piece of paper and write down the monthly amount of:

A. After-Tax Income: Take your bi-weekly pay cheque and multiply by 2. If your income fluctuates, take the average or minimum

B. Fixed Expenses: Rent, mortgage, utilities, cell phone bills, car insurance, life insurance, and minimum debt payments are a few examples which may apply to you. Add these numbers together to get a total sum.

C. Variable expenses: Groceries, eating out, coffee, shopping, entertainment, and all your other expenses that may fluctuate month to month. The best thing to do is to comb over 2-3 months worth of bank statements to get your estimates. 99% of the time we underestimate the impact these types of expenses have on our financial goals. Again, add them together to get a total number.

Calculate the following to figure out what is left over: Your total income [A], minus your total fixed expenses [B], minus your variable expenses [C]. This is what money is left at the end of each month to put towards paying down your debt or contributing to your savings.

Step 3: Set targets

Ask yourself this: Are you satisfied with the amount found in Part D above? Will this set you on track to achieve your goals? If not, consider tweaking some expenses.

Example – If you find yourself spending $125 a month on Uber, try taking public transit instead. Or try spending $200 a month at restaurants, and $100 more on groceries.

Recalculate the totals where you’ve made changes. With your updated total from Part D, you now have a new monthly “savings goal!”

Step 4: Set Up Automatic Payments

This is where the magic really happens. Go online and schedule automatic payments from your bank account to your debt or investment account monthly or bi-weekly. This way, you won’t have the option not to save.

Example – On payday (or the day after), set up an automatic transfer of $200 from your bank account into both your TFSA and Lending Loop accounts, or towards paying down any outstanding debt.

KOHO users can directly deposit money into their Lending Loop Account. You can set up recurring deposits monthly, bi-weekly or weekly and watch your nest-egg build up!

When connecting your bank account during Lending Loop’s sign-up process, simply ‘manually connect’ your institution and select ‘Peoples Trust Company’ from the drop-down list of financial institutions. If you’re already a Lending Loop user, email to update your connected bank to KOHO.

Here is a pro tip to set yourself up for success:

I have one central account (KOHO, of course!), which I use to divide my money between my fixed expenses, variable expenses, and savings! I try to pay my bills, and make automatic savings payments, right on payday. For those bills that aren’t available to pay on payday, I create a separate bucket for them, within my KOHO account, to pay them at a later date! I move money into this bucket right away so that the money isn’t available to spend on leisure goods. I then use my KOHO card for all my purchases, from groceries to even dog toys. Using just one card to manage all my expenses makes money management so much easier than having multiple bank accounts.

Tip: I also find it super useful to have a separate Joint Account with KOHO for my shared expenses, as explained here.

KOHO is a no-fee everyday spending account, with an awesome app that makes it easy to manage your money. You can create automated savings goals to save up for big expenses and vacations alike. Unlike typical debit cards, you earn 0.5% cash back on every purchase. Learn more about KOHO here.

Sign up for KOHO with code “LENDINGLOOP” and earn $20 on your first purchase.